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Recession looms for Europe in 2011: UN
Wed, 19 Jan 2011 08:52:33 GMT
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The UN says the sovereign debt crisis gripping much of Europe has lowered hopes for the euro zone economic recovery.
The UN has warned that euro zone could revert back into recession in 2011 under the burden of fiscal austerity measures imposed on some heavily indebted European countries.

"The impact of fiscal austerity planned or underway risks a renewed economic downturn" in Europe as a number of euro zone countries scramble to rein in their gaping budget deficit by means of a string of scrimp and save policies implemented in the wake of the global economic meltdown, the United Nations stated in its annual report on the World Economic Situation and Prospects published on Tuesday.

The euro zone, comprised of 16 European Union member states, plunged into its first period of recession in the third quarter of 2008, following the global financial meltdown that broke out in early 2007.

The financial crisis wreaked havoc in Greece in May 2009, forcing the EU and the IMF to pay the debt-laden country a 110-billion-euro bailout in an effort to salvage its economy.

In November, Ireland joined Greece as the country's banking sector hit rock-bottom and the government was forced to apply for a EUR 85 billion aid package to curb its vaulting budget deficit.

Meanwhile, the UN portrayed a grim economic outlook for euro zone's debt-laden countries in 2011, saying "countries entrenched in fiscal crises, such as Greece, Ireland, Portugal and Spain... will either remain in recession or see minimal recovery at best," The Wall Street Journal reported on Tuesday.

The UN further predicted that, under the circumstances, the euro zone economy will grow at a slower pace in 2011 as compared to the previous year.

According to the report, 30 million jobs were also shed around the world between 2007 and 2009 mainly due to the brewing financial crisis and the ensuing recession.

It also painted a bleak picture for the global economic growth, adding that the continuation of austerity cuts as well as "heightened tensions over currency and trade" threatens to further prolong the pace and scale of the economic recovery.

"This pace will not make much of a dent in unemployment rates, and recovering the jobs lost during the crisis will take at least another four years," the report concluded.

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